The essay below is written by Dr. Robert Nelson, a practicing direct primary care physician. It is a wonderful illustration of how ridiculous the rules of health insurance are, and how much they actually hinder medical care and make it so much more confusing and expensive than it should be. The secret that the insurance companies don’t want you to know is that it doesn’t have to be. If auto or homeowner’s insurance tried to work like health insurance, no one would tolerate it. Why do we tolerate it in the field of health care???
If Auto Insurance Worked Like Health Insurance, We Couldn’t Afford To Drive
By Robert Nelson, M.D.
For those that are still unsure to what extent physicians’ contracts with insurers drive the complexity and price of healthcare, let’s break it down. I think the best way to explain the effects that network contracts and the CPT code billing scheme have on prices in healthcare is to use an allegorical vignette to show how a similar system would work for your automobile.
Once upon a time, you wake up one cold January morning to an email alert from your auto insurance company about a business deal with an alliance of preferred providers that will give you discounts on all sorts of auto service and products. You think, ‘discounts sound great’… but don’t read the remainder of the email and you totally ignore the fine print. You’ve heard that congress has passed a law that is supposed to make auto insurance cheaper AND better so it covers more stuff. Maybe that is what this is about.
Later the same day, you receive an e-signature form via Dropbox to indicate your acceptance of the terms of this agreement and your desire to participate. You hastily sign it, much as you do your obligatory HR forms at work.
A few days later you drive over to get gasoline at your local Kroger gas station. However, before you are permitted to pump gas the new automated attendant prompts you for your Mystate, Gitmo or Regressive auto insurance card – you think to yourself, ‘that’s strange’. But you have Nationside and it is not listed on the menu.
Unable to pump your gasoline, you stand in line with 6 other frustrated patrons waiting for an explanation from the live person behind the bullet proof glass. One by one the other patrons leave with frustrated looks on their faces. When it’s your turn, you are told that Nationside is out-of-network with Kroger gasoline stations. When you ask how to pay, the attendant informs you that you must pay a deposit in form of a card on file before you fill up and then a claim will be submitted to your auto insurance company to determine how much you owe for the fill-up. You tell the attendant that you just want to pay cash and then you ask how much it is per gallon. The clerk tells you, “It all depends on your out-of-network benefits. If you over-pay, a refund will be issued. If you under pay, your card will be debited for the amount due.”
You are shocked! All you want to do is buy gasoline to fill your tank. They have plenty, yet they won’t sell it to you because you have auto insurance which is supposed to “cover” gasoline – but not at this particular station. All you can think is, “how could a once simple transaction have become so complicated”?
You immediately call your Nationside agent to inquire about the absurdity and are greeted by a voice message that gives you an 800 number to call a third-party administrator who handles all questions related to benefits. After being on hold for 20 minutes a pleasant customer service representative informs you how lucky you are to have six other gasoline stations in your network; none of which are close to your house or honor the discounts you rack up at Kroger for buying groceries.
You are told the government has mandated that gasoline must be a covered benefit of our auto insurance, even if we can afford it and want to pay for it directly – or even if you rarely drive your personal car and instead use public transportation. To make this work, of course, they had to mandate the purchase of full-coverage auto insurance even if you don’t have a lien against the car; and because of all the extra benefits such as gasoline it necessarily caused the insurance to be more expensive. This led to requiring a bunch of new taxes related to auto insurance to fund subsidies to help defray the increased costs for those that can’t now afford the previously affordable insurance. This was all done to make sure everyone could afford gasoline at a fair price, regardless of their ability to pay, especially if they chose to drive a large truck instead of a gas-efficient vehicle.
So after the explanation from your benefits liaison, which kind of made sense at the time she explained it, you wonder how you missed seeing this gasoline crisis developing right under your nose. You start to feel ashamed for not being more sensitive to the fact that your fellow citizens might not be able to afford equal access to as much gasoline as you enjoy. Just because you work hard and have a good job, doesn’t mean they should be forced to drive less than you!
You dutifully drive to one of stations in your network to find a line of cars waiting to fill up. When you finally reach the pump, there are three prices listed. The first price is the list price of $5.00 per gallon – but is doesn’t really show up that way on the pump itself. The second price is called the “network price” which is listed as $40 flat fee, regardless of how much gas you need – assuming you have met your deductible (wait for it). Since it usually costs you about $30 to fill up your Honda Fit, you are not pleased. But the guy with the jumbo cab pick-up is filling his to the brim with a huge smile on his face. The third price is not really a price but rather an explanation of network benefits if you haven’t met your deductible yet; being January of course you have not even put a dent in it. But as a benefit to being in the network, you are entitled to a huge discount of 40% off of the $5.00 per gallon price which brings it down to a mere $3.00 per gallon until your deductible is met, after which time you can get all the gas you want for $40 per stop.
Just the week before you could buy gasoline anywhere for about $2.50 per gallon, whether or not you needed one gallon or 100 gallons~ as long as you paid for all at the time of services.
So, given the fact that your gage is on empty you decide to fill up under the terms of the agreement and your credit card is put on file and debited the requisite $50 deposit. Your explanation of benefits comes in the mail 2 weeks later indicating the following breakdown:
Billed price of gas = $5 per unit x 15 gallons = $75
Network discount of 40% = $45 (cost to network members)
Plus Network Co-pay to station = $5
Applied benefits = $0 (deductible of $1500 not met yet)
Total Owed by Subscriber = $50
Deposit with Station: = $50
Please pay: = $0.00
Amount you saved for being in the Nationside FMO (fuel maintenance organization) = $25 or 33% off of billed charges!
Based on those tremendous savings you decide to take the wife and kids on a weekend ski trip to the mountains of West Virginia. (It doesn’t hit you [yet] that is used to cost roughly $30 give or take a few bucks to fill up your tank).
After a fun-filled weekend dodging trees and snowboarders on the icy slopes of Snowshoe Resort, you and the family pile in the car to return home. You don’t see any fuel providers that are listed on your network guide, so you stop at the first one that is convenient. The fuel provider front desk person runs your Nationside insurance card and finds out that no service stations in West VA have any agreements with Nationside Insurance. The good news is you don’t have to put down a deposit, you can just pay for gas the old fashion way, with good old cash! The bad news is the cash price is $5.10 per gallon! BUT WAIT, there’s more. Since you are a self-pay fuel customer, you are treated “special” due to your disadvantaged status which means you qualify for a 40% discount if you buy a pre-paid gas card for $100 that you can use at any Lucky Fuel Stops nationwide. This generous “discount” brings the cost down to $3.06 per gallon, which is almost your network price back home. With that quick little calculation, you decide to buy the pre-paid gas card and fill’er up! (realization at fill-up: There are no Lucky Fuel Stops in your home town). Guess, a trip back to W.VA is in your future if you want to get your money’s worth from the pre-paid gas card.
On the drive back, heavy freezing rain causes your wind shield wiper blades to rip to shreds. Luckily, they disintegrate right beside a 24 hour Auto-Boyz service center, and as luck would have it, Auto-Boyz is in-network with Nationside FMO! Being a 24 hour shop, they are kind of like the ER for cars. You plop down your Nationside card and the attendant enters you information, scans the bar code and informs you of the good news that you don’t have a deductible for this kind of road emergency; and that your co-pay for emergency auto service is only $200! (Did I mention you just needed 2 wiper blades)
Will that be credit or debit?
[ P.S. ~ I did’t have the heart to tell the hero of our story that his new Nationside policy payment invoice came in the mail – unfortunately, it doubled in price.]
Our allegorical illustration shows just how ridiculous, expensive and hassle-prone it would be to cover the cost of gasoline, wiper blades and other routine auto services under our auto insurance. Most of us would find a scheme like this unthinkable as it relates to our automobiles. So why do we tolerate the same lunacy when it comes to something as important as our healthcare dollars and choice of providers?
Yet we still continue to buy inexpensive (in an open free market) routine medical services via expense “comprehensive” prepaid health plans that require a claim for every service and a bill for every encounter via a complex CPT code scheme that uses fictitious fees (which help finance the profit of non-medical industries that contribute to costs but not care or quality outcomes).
By continuing to do so, we physicians wittingly participate in our own collective suicide as an independent profession. If we do nothing, we will hand our patients and future generations a system that is not financially sustainable and that severely limits choices.